Why what and how of ITR ? read to know! (2024)

It is often seen that ITR is a confusing concept. To begin with, ITR is an abbreviation for Income Tax Return. It is a form that an employee files for information about his/her income and tax. Every citizen in India is liable to pay a specific amount of tax. State and federal governments have amended various laws to provide relief schemes for those who earn below a certain amount. The income for each person can be earned from various sources such as salary, business or sale of property etc. The excess amount paid by the payee in a year is refunded back by the income tax department. This is often a concerning responsibility of the payroll team. With technological developments such as payroll software the payees can easily be notified. Having said that, it has become essential to have a brief knowledge of ITR for better knowledge.

Let’s list a few questions that can assist in gaining a better understanding of ITR :

What is ITR?

ITR as mentioned earlier is an abbreviation of income tax return. Under the income tax act of 1961, and income tax rule of 1962 , it obligates each citizen to file a return at the end of each financial year. The returns should be filed within a specific due date assigned by the income tax department. There are various forms such as ITR 1, ITR 2, ITR 3, ITR 4, ITR 4, ITR 5, ITR 6 and ITR 7 which are required to be filled. It is filled to cater information regarding the income and payable tax amount for a particular financial year between 1st april to 31st march of the next financial year.

In the last couple of years there have been many amendments that have been introduced in ITR 1 and ITR 2. There are seven different categories of ITR that specify seven different categories of taxpayers. For instance,

• ITR 1 which is known as “sahaj” is for those who receive salary at the end of each month.
• ITR 2 is for those who earn 50 or more than 50 lakh in non business transactions.
• ITR 3 is for individuals and HUFs which stands for Hindu Undivided Family with income generated from businesses
• ITR 4 which is known as “sugam” is for SMEs or small business professionals.
• ITR 5 is for those who are corresponding returns for firms and LLPs. (Limited Liability Partnership)
• ITR 6 is specifically for companies. Companies file income tax returns under ITR 6.
• ITR 7 is for trusts and societies. Any organization or committee that functions under its trustees are required to file income tax return under ITR 7.

These are the specific categories of ITR.these categorically divides the income tax return forms and has different procedures. The employees can easily gain the required information via payroll software.

Calculation of income tax

The state and federal government of each country has its own set of provisions for calculation of tax. each sector of employees have different income scale, and schemes that may or may not obligate them to pay tax. These calculations take into consideration each element of income for an individual, be it salary, freelancing, interest income etc. these elements sum up to collectively determine the total income of the individual. These calculations can easily be conducted by the payee with the assistance of payroll. It assists in providing a detailed break up of the deductions for better understanding of the payee.

The taxpayers are acclaimed to file deductions in the tax saving investment scheme under section 80 C.

This guides us to the next element that is TDS, abbreviated for tax deductions at source.

Tax deductions at source and form 26AS

It is the tax payers that summarize TDS amount from TDS certificate. It is required by the employee to file TDS amount from the four quarters of a specific financial year.

What role does 26AS play?

Form 26AS is responsible for the taxpayers to attain a well summarised detail of the TDS amount and tax paid during the financial year.

Choose the right income tax form

It is imperative for an individual to opt for the right income tax form. As mentioned earlier there are various forms categorically divided in accordance with the type of income.it is the responsibility of the taxpayer to ascertain the tax form/ITR. There are two modes for a taxpayer to file for ITR- online and offline. To file for ITR online a taxpayer can login to the portal. However, it is essential to note that the online mode provides a file only for two categories that is ITR 1 and ITR 4. For other modes, the taxpayer needs to file other forms via offline mode.

Download ITR utility form from income tax portal

It is often observed that online mode is the easier mode for filing any version of ITR. However, the taxpayer can easily download the ITR utility form from the portal. To download the form via visiting the sites i.e, www.incometax.gov.inonce the taxpayer has logged in the taxpayer can click on the download for the tab on the top of the menu on the page.

The next step is to choose the assessment year and download the offline utility software, i.e, Microsoft excel or java. As the accessibility of java and excel has been discontinued from the income tax department in the year AY 2020-2021.

Fill your details in the downloaded form

The next step is to fill in the details in the downloaded excel form to proceed. The taxpayer can fill in the utility form and check the refund or payable option in accordance with the calculation of the utility. The details of the challan can be filled in the downloaded form.

Validate the information entered

It is the responsibility of the taxpayer to ensure that the details are verified. If in case the taxpayer fails to verify the details it may cause repercussions that may result in huge amounts of penalties.

Convert the file to XML format

Once a taxpayer has validated the details he/she can click on the “generate XML” button on the right side of the file.

Upload the XML file on the income tax portal

• The next step is to upload the XML file on the income tax portal. To do so the taxpayer needs to login to the tax e- filing portal.
• Click on the e-file tab
• Select the “income tax return “ option.
• Provide the necessary details such as pan details of the assessee, ITR form number.
• Select the submission mode.
• Remember to opt for upload XML from the drop down corresponding to the field name submission mode.

By following these procedures a taxpayer can easily upload the ITR form. With each passing year there are amendments that are implemented in the entire procedure. For instance the latest update highlights the extended dates of filing the tax returns. This is a complicated obligation that each individual who is entitled to pay or file these obligations. Technology has smoothen the procedure for the employees. The payroll management team can easily track these changes via payroll software to avoid any delays.